By Rogers Wanambwa
KIU, Main Campus - According to Bank of Uganda, the Uganda shilling depreciated by 0.38 percent in 2020 compared to an appreciation of 0.6 percent in 2019
This implies a slight depreciation despite last year's global disruption in practically every sector of life.
Besides, exchange rate fluctuations between currencies impact the behaviour of several macroeconomic variables over a varying time period.
Currency depreciation, for example, can be expected to affect the demand for money, aggregate demand, and the levels of prices and output, as well as to induce external and internal relative price fluctuations that distort the composition of the expenditure.
DrAdamMugume, the Executive Director of Research at Bank of Uganda, told one of Uganda's leading dailies that the shilling has largely been stable in 2020 despite the COVID-19 pandemic that affected foreign exchange inflows, especially the tourism receipts.
“The relative stability is partly a reflection of subdued aggregate demand. The shilling depreciated by 3 percent between February and May 2020 but appreciated by 3.3 percent between May and December 2020,” he said.
“This reflects the effects of measures both domestic and global taken to mitigate the Covid-19 spread. On average, the shilling depreciated by 0.38 percent in 2020 compared to an appreciation of 0.6 percent in 2019,” Dr. Mugume added.
Dr. Mugume was enthusiastic about the near future and said that the upcoming election has not affected the economy much. Something that if was to happen, would have happened by now.
“We are continuing to see exchange rate appreciation and offshore investors have increased their investments by about $140 million in two months to December 2020,” he said.